India seeks UK carbon tax exemption in free trade deal talks

India has stepped up negotiations with Britain and sought an exemption from Britain’s planned carbon tax as part of efforts to secure a free trade deal before the British elections.

The discussions, which will take place during the upcoming Indian election campaign, are crucial for Rishi Sunak’s government, which is aiming to finalize the deal despite time constraints.

India’s negotiating team stressed the urgency of reaching an agreement before the British elections during talks held in London this week. With time running out, India has taken advantage of the limited window to put forward its priorities in the negotiations. The talks coincide with the general election campaign in India, where the Bharatiya Janata Party, led by Narendra Modi, is expected to record a third consecutive victory.

India’s commerce minister has indicated progress has been made in negotiations, indicating a deal is close to completion. However, India’s request for exemption from the UK’s Carbon Border Adjustment Mechanism (CBAM) has emerged as a major sticking point. India is arguing for an exemption based on its status as a developing country, raising concerns about the impact of the CBAM on its steel exporters.

The proposed exemption has sparked controversy as the CBAM is intended to reduce emissions and support UK steelmakers by ensuring a level playing field. Granting an exemption to India could undermine the effectiveness of the carbon tax and draw criticism for favoring certain trading partners.

The ongoing discussions follow the fourteenth formal round of negotiations between Britain and India, which remained open at India’s request despite the start of the election campaign. Key issues such as visa concessions for Indian workers and a social security agreement are also on the Indian agenda.

India’s reputation as a tough negotiator on trade deals underlines the challenges Britain faces in reaching a mutually beneficial deal. Despite the complexity of the negotiations, both sides remain committed to reaching an ambitious trade agreement that reflects their respective interests.

As negotiations continue, the Department of Business and Trade has reiterated its commitment to reaching a fair and balanced agreement that serves the best interests of both countries. However, there are no plans to change immigration policy as part of the trade deal negotiations.

As discussions progress, both Britain and India aim to address outstanding issues and finalize a comprehensive trade deal that promotes economic cooperation and growth.